Test your understanding: answers
(1). Nora’s first tax year of trading is 2025/26, the tax year in which she began to trade.
| Taxable trading income | £ |
|---|---|
| 2025/26 (1 September 2025 – 5 April 2026) (7/12 x £39,240) | 22,890 |
(2).
| Taxable trading income | £ |
|---|---|
| 2025/26 (1 June 2025 – 5 April 2026) (£22,750 + (3/12 x £64,800)) | 38,950 |
2026/27 (6 April 2026 – 5 April 2027) | 70,050 |
(3). Cobb has transition profits of £8,000 (£23,000 – £15,000) which have not yet been taxed.
These untaxed transition profits will be spread evenly over the remaining two years of the five-year period of taxation. Accordingly, £4,000 (£8,000 / 2) of these profits will be subject to income tax in 2026/27.
(4). The loss can be offset against general income of 2026/27 (the year of the loss) and/or 2025/26 (the previous year).
Where a claim has been made against general income, a further claim can be made against the chargeable gains of 2026/27 and/or 2025/26.
The loss can be offset against general income of 2023/24, 2024/25 and 2025/26 (the three years prior to the year of the loss on a first in, first out basis).
Any loss remaining will be automatically carried forward against future profits of the same trade.
